Various industry groups want lawmakers to pass into law the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill they consider investor-friendly and will attract more foreign direct investments (FDIs) and help generate more jobs.
In a recent virtual press briefing, Semiconductor and Electronics Industry in the Philippines Foundation, Inc. (SEIPI) president Dan Lachica said the country should have more competitive incentives to offer amidst the pandemic to win over and not lose potential investors to neighboring countries like Vietnam that provides generous tax perks to investors.
Debates are still ongoing in the Senate for the CREATE bill, which eyes the income tax holiday (ITH) period to be offered from two to four years. It will also give special corporate income tax rates of 8-10% for three to six years to registered investors after the ITH.
This, however. means that existing investments granted 5% gross income earned (GIE) incentive will be adjusted to new special tax rates after a transition period of four to nine years.
After this period, firms are expected to pay the regular corporate income tax rate, which will also be lowered to 25% from the current 30%, and eventually to 20% once the bill is enacted into law.
Industries, however, are pushing for the retention of the current incentives regime, including the 5% GIE, for existing investments. “We definitely like the retention of benefits for existing investors,” Lachica said, adding most industries support the ‘Option 2’ provided by Senator Ralph Recto.
Under ‘option 2,’ there will be no change in the current incentives regime for export enterprises, be it existing or new investments.
Export enterprises are those registered with investment promotion agencies (IPAs) engaging in manufacturing, assembling or processing activity, and information technology and business process outsourcing services resulting in direct exportation of at least 70 percent of its total production or output.
Other choices provided include ‘Option 1’ which aims to exempt five IPAs, including the Philippine Economic Zone Authority (PEZA), from the new incentives regime of CREATE. This means incentives in these IPAs will be retained.
‘Option 3’, on the other hand, advocates a ’grandfather rule’ wherein all existing investments will retain their incentives, while all new ones will follow the incentives under CREATE.
Lachica said the ‘Option 2’ will likely encourage investors to expand their businesses in the Philippines and will also guarantee investments on new technologies.